It takes the edge off of trying to use the money/forcing a deal since I am not paying interest on it until I draw it.But there are a couple of different variables in your situation, you will technically have to pay another set of "closing costs" when you pay off your home, whoever gives you the heloc will have to appraise, underwrite, etc. 

This situation could be a bit of a game changer for folks wanting to exit 1031 land with more tax free dollars.If an entity owns property and 1031s and subsequently dissolves and distributes the property to the members do those members inherit the requirements of a conversion under 1031. 

I was in a similar situation.

I'm curious as to how tax deductions work in this situation?

Current Situation: I purchased my first duplex back in June and have lived in it the last several months while I am giving the place a complete update (new flooring, paint, windows.. etc.).

Hi Michael,I'm in a similar situation as you are (just starting out).

An extremely weird situation Going on there. 

Here's the situation..

If you are looking to purchase a home that needs rehab I would sit down with a mortgage broker and discuss your options and tell them you want more info on the FHA 203k loan and the Fannie Mae Homestyle renovation loan.I have had several clients here in Connecticut use both loans with success and they typically chose one or the other based on their personal situation.

Neither situation is conducive to FHA mortgage.